How to Manage Overpayments

Paying Back Patients & Payers

It does happen at times that a medical practice gets reimbursed for more money than the services provided cost. This is overpayment. Most of the time, it’s the insurance carrier that makes the overpayment. However, there are times when the patients pay too much for a service too. In both cases, the overpayment should be returned to the patient or the payer.

In case it is a patient that has made the overpayment, they should be notified as soon as it is discovered. Overpayment can be handled in multiple ways, but the provider cannot legally keep the money indefinitely.

Patient Overpayments:

Let us take an example to simplify this. Suppose a patient visits a dermatologist to remove a mole. During the visit, the patient paid the co-pay. But on the removal of mole, the procedure is considered as a surgery and does not require a co-pay. This means that the co-pay that was paid before, is now an overpayment.

When the practice finds out about this, there are two things that can be done:

Notify the patient. On notifying, if the patient plans on returning, you can suggest to credit the overpayment for the next visit. However, if the patient does not want the credit, the overpayment should be returned.

Immediately send a check for the overpaid amount to the patient with a note that explains the overpayment.

Whatever may be the case, keeping the overpayment is against the law.

Payer Overpayments:

If the overpayment is made by an insurance company, the first step would be to check if the payment is actually an overpayment. This can be done by calling the company and asking them to explain their policies that determine the payment amount. You could also ask them if the claim was processed correctly.

If the payment is indeed an overpayment, the claim should be reprocessed showing the correct payment and request should be sent for the provider to return the overpayment.

It may be possible that the payer asks the provider to return the overpayment over the telephone. When this is the case, request a written explanation. On receipt of the written request, attach the check for the overpayment and mail it to them. If a specific address is not provided, make sure you send the mail to the claims department.

Sometimes, the entire payment could be wrong. For example, the provider did not see the patient and still received the payment for it. When this is the case, write “void” on the check and return it to the payer with a note attached explaining how the provider has not seen the patient.

When It’s Not an Overpayment:

During the call, if the payer states that the claim was processed correctly and there isn’t any overpayment, then further investigation is warranted.

This can happen if the patient has two insurance plans. The primary plan makes the payment of a certain amount and then the secondary insurance processes the claim. This results in a credit balance when the secondary payer allows and pays a higher amount than the primary carrier.

This is not actually an overpayment. The adjusted amount from the primary carrier was more, based on the secondary insurance carrier’s payment. Hence, this isn’t an overpayment. The patient’s balance needs to be adjusted to offset the credit. In such cases, no money has to be returned.

Some patient’s secondary insurance carrier is privately purchased insurance. These companies do not always follow the same guidelines as other carriers. More often than not, these carriers ignore the amount paid by the primary carrier and make payment as if they are the sole insurance carrier for the patient. This results in overpayment.

Here, the overpayment belongs to the patient as the patient as purchased the plan. The provider can, in no way, keep the money. Also, they cannot collect more than what was billed for services rendered.

Overpayments shouldn’t be ignored. Always try to determine if the overpayment is actually an overpayment, if so, whom should the payment be returned to, and, what should be done to return it.

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